You are the principal economist at a firm that produces some output y based on the following function: y = f(x1, x2) = x ³ x ² 1. Calculate the marginal product (MP) of both inputs at some arbitrary input bundle (x₁, x₂). Interpret the sign of both. 2. Using your answer in the previous part, calculate OMPT₂/0x₁. Interpret what this means. 3. Calculate the technical rate of substitution between ₁ and x2, i.e., MP/MP₂. 4. Does this production function exhibit increasing, decreasing, or constant returns to scale? Show. 1 5. Lay out a brief, realistic example of x₁, x2, y that fits the dynamics that you calculated.

You are the principal economist at a firm that produces some output y based on the following function: y = f(x1, x2) = x ³ x ² 1. Calculate the marginal product (MP) of both inputs at some arbitrary input bundle (x₁, x₂). Interpret the sign of both. 2. Using your answer in the previous part, calculate OMPT₂/0x₁. Interpret what this means. 3. Calculate the technical rate of substitution between ₁ and x2, i.e., MP/MP₂. 4. Does this production function exhibit increasing, decreasing, or constant returns to scale? Show. 1 5. Lay out a brief, realistic example of x₁, x2, y that fits the dynamics that you calculated.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 24P: Translate the following monetary payoffs into utilities for a decision maker whose utility function...

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